As an entrepreneur, making financial decisions is an essential part of running a successful business. Whether it’s deciding how to allocate resources, invest in new technology, or secure funding, the choices you make can have a significant impact on the future of your company.
In this article, we’ll look at ten of the best financial decisions made by entrepreneurs, highlighting the benefits and lessons that can be learned from each example.
1. Investing in long-term growth
One of the most crucial financial decisions that entrepreneurs can make is investing in long-term growth. This means looking beyond short-term gains and focusing on building a solid foundation for the future. For example, Amazon founder Jeff Bezos has always had a long-term vision for his company, and as a result, he has consistently invested in new technologies and expansion, even when it meant sacrificing short-term profits. Today, Amazon is one of the world’s largest and most successful companies, and it’s all thanks to Bezos’ commitment to long-term growth.
2. Diversifying revenue streams
Another smart financial decision made by entrepreneurs is diversifying their revenue streams. This means not relying on just one source of income, but rather having multiple sources of income that can help sustain the business during difficult times. For example, Tony Hsieh, the former CEO of Zappos, realized that the company’s reliance on a single revenue stream (online shoe sales) made it vulnerable to market fluctuations. As a result, he diversified the company’s revenue streams by expanding into clothing and other types of merchandise. This decision helped Zappos weather the recession in 2009 and emerge even stronger.
3. Being frugal
While it’s important to invest in the growth of your business, it’s also essential to be frugal and make smart financial decisions when it comes to spending. This means being mindful of how you allocate resources and cutting unnecessary expenses where possible. One entrepreneur who exemplifies this approach is Sam Walton, the founder of Walmart. Walton was famous for his penny-pinching ways, and he implemented a number of cost-saving measures, such as negotiating with suppliers for lower prices and building his own distribution centers, which helped Walmart become one of the most successful companies in the world.
4. Taking calculated risks
While being frugal is important, it’s also essential for entrepreneurs to take calculated risks in order to grow their businesses. This means weighing the potential costs and benefits of a decision and making an informed choice. One entrepreneur who did this successfully is Elon Musk, the founder of SpaceX and Tesla. Musk has always been willing to take risks, and his willingness to push the boundaries has helped him achieve incredible success. For example, he invested his entire net worth into SpaceX, which was a risky move that paid off when the company became the first private company to send a spacecraft to the International Space Station.
5. Seeking outside funding
While it’s important to be self-sufficient, sometimes entrepreneurs need to seek outside funding in order to grow their businesses. This can come in the form of loans, venture capital, or crowdfunding. For example, Mark Zuckerberg, the founder of Facebook, knew that he needed additional funding to scale his company, so he sought out venture capital from top investors like Peter Thiel. This decision helped Facebook become the social media giant it is today.
6. Being flexible
As an entrepreneur, it’s essential to be flexible and adapt to changing circumstances. This means being open to pivoting your business model or altering your strategy if it’s not working. For example, Airbnb co-founder Brian Chesky had originally envisioned his company as a way for people to rent out air mattresses in their homes, but after a few months, it became clear that this model wasn’t working. Chesky and his co-founders quickly pivoted and focused on providing a platform for people to rent out their entire homes or apartments, which ultimately led to Airbnb’s massive success.
7. Building a strong team
Another important financial decision that entrepreneurs make is building a strong team. This means hiring the right people and providing them with the resources and support they need to succeed. For example, Steve Jobs, the co-founder of Apple, was known for assembling a team of top talent, including design guru Jony Ive and marketing genius Phil Schiller. Together, this team helped Apple become one of the most innovative and successful companies in the world.
8. Being strategic with acquisitions
Acquiring other businesses can be a smart financial decision for entrepreneurs, but it’s important to be strategic about it. This means carefully evaluating potential acquisition targets and making sure they align with your company’s goals and values. One entrepreneur who did this successfully is Larry Page, the co-founder of Google. Page has made several key acquisitions over the years, including the purchase of Android, which helped Google become a dominant player in the mobile market.
9. Diversifying investments
Just as it’s important to diversify your revenue streams, it’s also crucial to diversify your investments. This means not putting all your eggs in one basket and instead spreading your money across different asset classes and industries. This helps mitigate risk and can lead to more stable and consistent returns over time. For example, Warren Buffett, the CEO of Berkshire Hathaway, is known for his diversified investment strategy, which has helped him achieve incredible success and wealth.
10. Staying focused
Finally, one of the best financial decisions that entrepreneurs can make is staying focused on their goals and priorities. This means avoiding distractions and staying true to your vision, even when faced with challenges or setbacks. For example, Howard Schultz, the CEO of Starbucks, has always stayed focused on the company’s mission of providing high-quality coffee and a welcoming experience to customers, and this has helped Starbucks become one of the most successful and beloved brands in the world.
As an entrepreneur, making financial decisions is an essential part of running a successful business. From investing in long-term growth to being flexible and staying focused, there are many key strategies that can help you achieve financial success. By learning from the examples of successful entrepreneurs, you can make informed decisions that will help your business thrive.